Small businesses will have access to $350 billion in forgivable loans, but they have to meet certain requirements
On March 27th, 2020 President Donald Trump signed legislation that Congress approved this week to support the U.S. economy and workers through the coronavirus outbreak, and small businesses are among those that will benefit.
The apex of the $2 trillion stimulus package were the one-time payments of $1200 to adults making up to $75,000. But the legislation also included a number of proposals aimed at supporting small businesses that have been hard hit as the pandemic has forced businesses to cut many, if not all employees in accordance with social-distancing orders from state and local officials across the country.
The Senate’s plan currently supports small businesses in the following ways, according to policy experts:
• A $350 billion forgivable loan program designed to ensure that small businesses do not lay off employees
• A 50% refundable payroll tax credit on worker wages will further incentivize businesses, including ones with fewer than 500 employees, to retain workers
• Looser net operating loss-reduction rules that will allow businesses to offset more
• A delay in employer-side payroll taxes for Social Security until 2021 and 2022
• Sole proprietors and other self-employed workers could be eligible for the expanded unemployment-insurance benefits the bill provides
• A portion of the $425 billion in funds appropriated for the Federal Reserve’s credit facilities will target small businesses
How does the $350 billion small-business loan program work?
The Small Business Administration, under the stimulus package, will oversee the Paycheck Protection Program, which will distribute $350 billion to small businesses that can be partially forgiven if the companies meet certain requirements. The loans will be available to companies with 500 or fewer employees.
Loans will be administered by banks and other lenders. Businesses can receive loans up to $10 million, based on how much the company paid its employees between Jan. 1 and Feb. 29. The loans will carry an interest rate of up to 4%. The bill provides for an expedited origination process.
If the business uses the loan funds for the approved purposes and maintains the average size of its full-time workforce based on when it received the loan, the principal of the loan will be forgiven, meaning the company will only need to pay back the interest accrued.
Click here to see the full Coronavirus Aid, Relief, and Economic Security Act.